An Introduction to OTT and CTV Kochava Guides for Marketers 1 Introduction The way in which we watch television has changed. In a little more than a decade, television has undergone a dramatic transformation from scheduled cable programs to on-demand, streaming services with an explosion of new content, streaming apps, and devices from which consumers can watch. The Evolution of TV FIRST TRADITIONAL – 1927 TELEVISION 1948 – CABLE TV LAUNCHED CABLE INTRODUCES – 1990 HIGH-SPEED INTERNET 1998 – NETFLIX VIDEO DVD RENTAL FIRST DVR USED – 1999 2000 – BROADBAND INTERNET IS INTRODUCED NETFLIX STREAMING & – 2007 APPLE TV LAUNCH 2014 – AMAZON FIRE STICK & ROKU TV LAUNCH TV GOES CORDLESS – 2014/2015 2015 – HBO NOW LAUNCHES AND DOESN’T REQUIRE A CABLE SUBSCRIPTION DISNEY+ LAUNCHES – 2019 2020 – PEACOCK LAUNCHES PARAMOUNT+ LAUNCHES - 2021 With these new forms of television, more advertising opportunities arise. Understanding this powerful marketing channel and how to utilize it best will give you the competitive edge in your brand growth and engagement efforts. 2 In this Guide Getting it Straight: OTT vs. CTV. What’s the Difference? 4 Over the Top (OTT) 4 Connected TV (CTV) 4 A View From the Top: Unpacking the OTT and CTV Ecosystem 5 The Devices 7 Types of Streaming Services and Content Providers 9 Common Types of OTT Ads 11 OTT Advertising Platforms 12 The Benefits of Advertising on OTT and CTV 13 Addressability & Targeting 14 Viewability 15 Return on Investment (ROI) 15 Challenges with OTT and CTV 16 Measuring OTT and CTV 18 Measurement for Brands 21 The Future of OTT and CTV 24 Content Wars 25 More Devices per Household 25 Subscriptions 25 Glossary 26 3 Getting it Straight: OTT vs. CTV. What’s the Difference? Have you ever wondered if you’re using the terms OTT and CTV incorrectly? If so, you’re not alone. According to a survey done by Brand Innovators, their respondents had varied definitions of OTT and CTV and some didn’t even know what the terms meant. Clearly, these terms are often misused so let’s start by setting the record straight. Over the Top (OTT) The term OTT refers to television and filmcontent streamed “over the top” of the internet directly to viewers, rather than through traditional broadcast, cable, or satellite mediums. Content may be streamed “over the top” on connected TV (CTV) devices, desktop/laptop, mobile phones, and tablets from apps or websites. As a general rule of thumb, use OTT when you’re referring to the universe of content being streamed “over the top” of the internet. Connected TV (CTV) CTV is used to describe TVs that are either directly internet enabled (eg, smart TVs) or the devices that can be plugged into a TV to stream content “over the top” of the internet–think Amazon Fire, Roku, and Chromecast sticks, Apple TV, PlayStation and Xbox gaming consoles, etc. Over the Top (OTT) OTT Streaming Services Devices for Streaming OTT Content Connected TV (CTV) Desktop/Laptops Phones/Tablets Smart TVs Streaming Boxes/Sticks Game Consoles Kochava is an official member of the IAB Tech Lab, which has put together an informative post on this subject. 4 A View From the Top: Unpacking the OTT and CTV Ecosystem 5 A View From the Top: Unpacking the OTT and CTV Ecosystem ADVERTISERS ADVERTISING OTT ADVERTISING PLATFORMS Programmatic Platform Direct Publisher Direct STREAMING SERVICES CONTENT SVOD AVOD TVOD PVOD CTV DEVICES KOCHAVA SOLUTIONS KOCHAVA NON-CTV DEVICES HOUSEHOLDS OTT CONSUMERS 6 The Devices Ads run through OTT may see airtime across a whole spectrum of devices, depending on where and how you buy your media (more on OTT advertising platforms later). Non-CTV Capable of streaming OTT content, but not considered CTV, are devices including smartphones, tablets, and computers. DEVICES SMARTPHONES TABLETS/PADS DESKTOPS LAPTOPS CTV CTV devices include: smart TVs, gaming consoles, and other streaming boxes/sticks. CTV DEVICES SMART TVS GAME CONSOLES STREAMING BOXES/STICKS 7 In the past year, the majority of OTT viewing has occurred on CTV devices while mobile and tablet devices only make up 15% of the viewing time. Among CTV platforms, Roku is the most popular by far. Share of Time Spent Viewing OTT Streaming Video Worldwide, by Device, Q3 2020 (% of Total) Share of Time Spent TABLET (5%) MOBILE PHONE (10%) CONNECTED TV DEVICES (50%) DESKTOP/LAPTOP (10%) GAMING CONSOLE (10%) SMART TVS (15%) Connected TV Devices 48% 28% 8.5% 6.8% 5.5% Other 3.9% Note: The above chart represents activity tracked by Conviva, broader industry metrics may vary; numbers may not add up to 100% due to rounding. Source: “Conviva’s Latest Streaming Data Shows Advertisers Beginning to Reemerge; Rise of Smart TVs Slows Growth for Connected TV Devices.” Conviva, 20 Oct. 2020, www.conviva.com/press-releases/conviv-state-of-streaming-q3-2020/. 8 Types of Streaming Services and Content Providers OTT content is accessible through a variety of streaming services and content providers in a video on demand (VOD) format, which allows viewers to select and view content when they choose. The two primary types are subscription video on demand (SVOD) and ad-supported video on demand (AVOD). VOD SUBSCRIPTION VOD (SVOD) AD-SUPPORTED VOD (AVOD) SVOD services, such as Hulu and Netflix, charge a flat AVOD services, such as Crackle and Vudu offer free subscription fee, usually at a monthly rate for unlimited access to video and television content but show ads to access to streaming content. the viewer as the method of monetization. Transaction video on demand (TVOD) is another format that allows consumers to purchase download or viewing rights to a particular film, TV show, or TV episode on a transactional basis (think buying a movie on Amazon Prime Video or Vudu). Premium video on demand (PVOD) is an even newer format enabling consumers to purchase early access to content prior to, simultaneously with, or shortly after its theatrical release. One example of this was Disney+ offering early access to Mulan, a 2020 release as a follow-on to the 1998 animated classic. Amazon’s Prime Video Cinema offers on-demand rental of titles currently in theaters. Amazon Prime Video is a clear example of how a streaming service can fall into multiple categories, as it offers both SVOD, TVOD, and PVOD options. CBS All Access (now Paramount+) is both SVOD and AVOD, since it offers a lower subscription price with limited ads, or a premium ad-free option. The Content In the early days of OTT, services like Netflix were aggregators of existing video and film content from other networks, studio houses, and production companies. Today, most major players in the space also produce their own original content, with the goal of providing unique, hit titles that are only available through their service thus helping to retain and grow their subscriber base. 9 As of Q2 2020, here are the top streaming services on the OTT market. Video Streaming Distribution Percent by Brand Q2 2020, P2+ NETFLIX (34%) YOUTUBE (20%) HULU (11%) AMAZON (8%) DISNEY+ (4%) OTHER (23%) Source Nielsen: “Growth Spurt: Time Spent Streaming Ad-Supported Video Is Outpacing Big-Name SVOD Viewing.” Nielsen, The Nielsen Company, 18 Aug. 2020, www.nielsen.com/us/en/insights/article/2020/growth-spurt-time-spent-streaming-ad-supported- video-is-outpacing-big-name-svod-viewing/. 10 Common Types of OTT Ads Advertisement spots run within OTT content typically take three forms: • Pre-roll: Ads inserted prior to the video content starting • Mid-roll: Ads inserted within the main video content • Post-roll: Ads inserted after the video content has finished On most AVOD platforms, users are unable to skip the ad no matter its placement (pre, mid, post); however, because most ads are only 15, 30, or 60 seconds long, users tend to watch at least part of the advertisement, if not all of it. On YouTube, users usually have the option to skip the ad after five seconds. Within those first few moments, advertisers strive to capture the consumer’s attention to gain brand awareness and improve completed view rates. Other Ad Formats Platforms like Roku, Vizio, and others also offer endemic ad inventory on their home screens, screensavers, and more. These ad placements are commonly utilized for streaming services to promote their channel apps with spotlights on a particular movie or show premiere. The goal is to entice the consumer to add the channel app to their device, start a free trial, and even purchase or rent particular content. 11 OTT Advertising Platforms There are three main avenues for advertisers to buy media on OTT. • Programmatic One of the most effective and cost-efficient ways for advertisers to enter the OTT space is through programmatic platforms. Ad placement can be automated with programmatic bidding because of direct relationships between inventory exchanges and other OTT advertising platforms. Advertisers are able to target audiences viewing OTT content across multiple streaming services, platforms, and devices. • Platform Direct Advertisers can choose to go directly to major platforms such as Roku, Vizio, Samsung, etc., and buy inventory through the platform’s own exchange. While this is a very straightforward way to buy ad space, it limits the campaign to that specific platform and doesn’t allow for cross-platform advertising. • Publisher Direct Going directly to the publisher (Hulu, Sling, Paramount+, Crackle, etc.) is another option and allows for more control over ad inventory. However, like Platform Direct, Publisher Direct limits the advertiser’s campaign to that specific publisher’s content. 12 The Benefits of Advertising on OTT and CTV 13 The Benefits of Advertising on OTT and CTV Addressability and Targeting As challenges mount to addressability and precise targeting in both mobile and display with recent changes to third-party cookie policies and the decreasing availability of the identifier for advertisers (IDFA) on iOS devices, the OTT space offers great advantages.